“The upgrade reflects our enhanced view of the company’s credit profile, which benefits from its increasing ownership of Toronto-based Northbridge Financial as well as from its improved financial flexibility resulting from significant investment gains during a period of challenging economic conditions,” explained credit analyst Michael Gross.

S&P noted that “Fairfax’s competitive position is specifically enhanced by its increasing ownership of Toronto-based Northbridge Financial and its intent to secure 100 percent ownership in early 2009, subject to shareholder approval.

“Through its investment expertise, Fairfax reported substantial realized investment gains of $1.9 billion through Sept. 30, 2008. Although we do not view this level of investment performance as sustainable, Fairfax has produced a record of above-average investment performance for more than two decades.”